Why China Isn't Buying the iPhone

A few tech writers are congratulating themselves for predicting the disappointing debut of the iPhone in China on Friday. Many have linked to the various reports from The Wall Street Journal's Loretta Chao, who closely followed the run-up and launch of the product, which she says netted a "lukewarm" reception. What accounts for Apple's hard luck? Bloggers offer several theories:

No Wi-Fi The Inquirer's Nick Farrell blames the Chinese government's temporary ban on Wi-Fi wireless Internet connections and Apple's submission to it, which left the company with thousands of first-run models lacking Wi-Fi. Meanwhile, the alternative state-sponsored Chinese wireless network costs users much more, as Farrell explains: "An Iphone without WiFi is one where you have to use the phone company for all functions and therefore incur a higher phone bill…The feeling will be that if Americian capitalists provide things for Californians they should also provide them for the Chinese. With China such a big market tinkering with the WiFi should have been no big deal." Mashable's Stan Shroeder concurs: "Yes, you can live without WiFi. But it’s an important feature, and
paying 4,999 yuan ($730) to 6,999 yuan ($1,025) for the iPhone might be
too much for the Chinese who can buy the regular 3GS with WiFi on the
black market for about $835. Adding insult to injury is the fact that
the iPhone is manufactured in China."

Too PriceyAlex Wilhelm acknowledges that the absence of Wi-Fi on the first line of iPhones released certainly is a mitigating factor in their comparatively low-sales thus far, but says that the real issue Chinese consumers have with the device is its indefensibly inflated cost: "It would seem that the largest and most constant miff with the device is its high price. The phone costs a stunning $1000 dollars without a contract in China, a stiff price increase over the $600 that the phone costs in the United States unsubsidized…That high price combined with the current economic state of the world, and crippled connectivity have turned what could have been the biggest launch of the iPhone so far, into a flop."

The Gray Market Many bloggers, including ComputerWorld's Seth Weintraub, point to the fact that the iPhone has already been available in China since early 2008 in a quasi-legal state. That's when Hutchison Telecom partnered with Apple to sell the iPhone in the special administrative regions of Hong Kong and Macau. Even before that deal was struck, wholly illegal, "unlocked" iPhones (i.e. those hacked to accommodate other mobile networks besides the officially licensed ones) proliferated throughout the country's robust electronics black market. Furthermore, as Weintraub notes, possessing Wi-Fi capabilities and available at a lower cost than their legal counterparts, the gray market iphones are simply the better bargain: "So Apple might have already finally met its match in when it comes to Chinese competition...from other iPhones."

The Chinese Government At GigaOm, Sebastian Rupley says that the high price of Apple products hasn't been a deterrent before, so that shouldn't be the company's main concern when hocking the iPhone to the Chinese. Indeed, he believes that the most difficult part with be overcoming the government's tight control over telecommunications, particularly with regards to Apple's free-wheeling applications store: "In the U.S. market and elsewhere, great applications are driving the iPhone’s rapidly increasing adoption. For censorship reasons, and many others, the Chinese government is unlikely over time to be as open as other governments are to a free-flowing, homegrown iPhone application ecosystem.

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